Postscript: Much of economic and community development practice takes conventional urban economic theory as a given. I was in that camp when I started blogging back in 2006. All of that changed when I read Robert Guest's book, "Borderless Economics: Chinese Sea Turtles, Indian Fridges, and the New Fruits of Global Capitalism." I can't put the genie back in the bottle. The problem with this line of thinking is that it undermines the rationale for a lot of redevelopment projects currently en vogue. It undermines the rationale for efforts to fight persistent poverty. I find myself embroiled in existential debates instead of a friendly exchange of constructive criticism. Migration is economic development. People develop, not places.

At the same time, there's a vein of thought that Vancouver's recent focus on rezoning land to provide places to live-especially a downtown condo forest that has become the city's defining feature-has left it with a dearth of office buildings and factory sites where all those new residents might actually be able to find work.

I rarely encounter a description of the tension between residents and businesses over dear urban land. Residents have to work somewhere in order to pay rent. In terms of housing affordability, the Minneapolis Fed study concludes that income (i.e. demand) matters more than supply restrictions. The considerable time I've spent studying this issue, that conclusion makes sense, in a fundamental supply-demand kind of way. To date, everyone who has taken issue with my position argues a point I have conceded. No one has taken aim at the demand side of the equation and the work of scholars such as David Ley (see above article about Vancouver's real estate market). Yes, less restrictive zoning makes land and homes less expensive. That's not a counter-argument to the many posts I've written on the subject.

Postscript: One of the conclusions from the Cleveland Fed analysis of Owners’ Equivalent Rent (OER) inflation, "High vacancy rates do not appear to slow OER inflation down appreciably". That's not a ringing endorsement for increasing housing supply in order to make rents more affordable. Theoretically, increasing supply makes sense. Practically, it may not work. The Fed's analysis is hardly definitive. It still beats the unfounded policy suggestions coming from supply-side ideologues.

Postscript: Supply-side economics (e.g. Laffer curve) make intuitive sense, thus appealing to politicians who are pursuing some other agenda. Theoretically, everything is a go. Practically, when academic scrutiny is applied to practice, the suggested benefits disappear. The journey from abstraction to on-the-ground change is a perilous one. The main disconnect I see is taking Glaeser's work (which establishes a link between supply restrictions and housing prices) and assuming that the practice of upzoning (one of many supply-side avenues) will deliver affordable housing. Dr. Doom's cautionary tale teaches us to beware of such claims "about the magnitude of these effects". Glaeser is today's Laffer.

The normal summertime surge in demand for high-end apartments in Hong Kong's top neighborhoods was weak again this year as companies changed the way they pay for housing for their expatriate employees and the finance sector continued to struggle.

A shift away from banking and toward retail and other sectors, among companies relocating staff, has pushed down demand. Hong Kong's efforts to cool its housing sector have weighed on the market as well.

Expatriate families relocating to Hong Kong, the main prospective tenants for high-end leases above 80,000 Hong Kong dollars (US$10,300) a month, usually move in the summer months before the school year begins. The start of the third quarter is the "traditional busy time" in the high-end leasing market, according to Edina Wong, senior director of residential leasing at Savills, a real-estate consultancy company. This year, "there's been a minor bump, but not as big as previous years'."

It hasn't been nearly enough to make up for the longer trend: a decline in luxury rental demand by 30% to 40% over the past two years, according to Ms. Wong. "It's a huge drop," she said. "The higher the rental, the quieter it is."

The above quoted passage accomplishes two things. First, putting aside the tax intended to cool the real estate market, the demand slack has a dramatic impact on prices. Second, the overall real estate market is segmented, providing a more nuanced picture of housing affordability in Hong Kong. In my next post, I tackle the disaggregation of housing markets.